Question
Purchase Company recently acquired several businesses and recognized goodwill in each acquisition. Purchase has allocated the resulting goodwill to its three reporting units: RU-1, RU-2,
Purchase Company recently acquired several businesses and recognized goodwill in each acquisition. Purchase has allocated the resulting goodwill to its three reporting units: RU-1, RU-2, and RU-3. Purchase opts to skip the qualitative assessment and therefore performs a quantitative goodwill impairment review annually.
In its current-year assessment of goodwill, Purchase provides the following individual asset and liability carrying amounts for each of its reporting units:
| Carrying Amounts | ||||
| RU-1 | RU-2 | RU-3 | ||
| Tangible assets | $215,500 | $261,000 | $158,250 | |
| Trademark | 257,000 | |||
| Customer list | 154,500 | |||
| Unpatented technology | 232,500 | |||
| Licenses | 100,000 | |||
| Copyrights | 65,500 | |||
| Goodwill | 190,250 | 187,550 | 136,500 | |
| Liabilities | (35,000) | |||
The total fair values for each reporting unit (including goodwill) are $773,950 for RU-1, $736,450 for RU-2, and $743,500 for RU-3. To date, Purchase has reported no goodwill impairments.
How much goodwill impairment should Purchase report this year for each of its reporting units?
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Advanced Accounting
Authors: Joe Hoyle, Thomas Schaefer, Timothy Doupnik
10th edition
0-07-794127-6, 978-0-07-79412, 978-0077431808
